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Buy 5 Transportation Services Stocks on Strong Demand

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The diversified transportation sector, which includes airline operators, railroads, truckers and shippers, to name a few, performed well in the first half of 2018. Strong U.S. macro-economic fundamentals, substantial surge in manufactured and retail goods along with improving global economic conditions is anticipated to fuel the transportation sector’s growth.

Consequently, companies offering equipment financing and leasing, logistics and supply chain management services to transporters have also rebounded in 2018. At this stage, investment in transportation services stocks with a favorable Zacks Rank will be a prudent move.

Growth Inducing Polices

As the U.S. economy continues to grow, demand for carriage is also increasing and this momentum is anticipated to sustain in the rest of 2018. The two pro-growth agendas of Trump, namely, significant cut in corporate tax and deregulation are major catalysts to the transportation sector.

Massive reduction in corporate taxes from 35% to 21% has brought corporate tax rate to its lowest level in 78 years. A large part of transporters book much of their revenues within the United States. Consequently, a significant reduction in corporate tax rate faced by these companies would be immediately accretive to cash flow.

Strong U.S. Economic Fundamentals

U.S. GDP grew at 4.1% in the second-quarter of 2018, marking its highest gain since the third quarter of 2014 and the third-best growth rate since the Great Recession of 2008-2009.

Unemployment rate in July fell 0.1% from June to 3.9%, its lowest level in nearly 50 years. Average hourly earnings increased by 0.3% to 2.7% over the same period a year ago, reducing investor’s fear of a hyper-inflation.

For July, the Conference Board's measure of U.S. consumer confidence index is pegged at 127.4 compared with June’s revised reading of 127.1. July’s reading was also better than the consensus estimate of 126.3.

Out Top Picks

A robust U.S. economy, healthy consumer and business confidence, massive tax haul and business friendly policies of the government are anticipated to propel transportation sector’s growth. This key sector (one of the top 16 Zacks sectors) is likely to end 2018 on a triumphant note. Consequently, growth potential of transportation services stocks make them lucrative.

The chart below depicts price performance of our five picks in the last three months.

Echo Global Logistics Inc. (ECHO - Free Report) is a leading provider of technology enabled transportation and supply chain management services. It sports a Zacks Rank #1. The company has expected earnings growth of 93% for current year. The Zacks Consensus Estimate for the current year has improved by 12.9% over the last 30 days.

Matson Inc. (MATX - Free Report) offers shipping logistics services in Hawaii, Guam, and Micronesia islands and expedited service from China to southern California. It flaunts a Zacks Rank #1. The company has expected earnings growth of 31.5% for current year. The Zacks Consensus Estimate for the current year has improved by 5.9% over the last 30 days.

Trinity Industries Inc. (TRN - Free Report) provides various products and services to the transportation, energy, chemical, agriculture and construction sectors in the United States and internationally. It carries a Zacks Rank #1. The company has expected earnings growth of 2.6% for current year. The Zacks Consensus Estimate for the current year has improved by 12.2% over the last 30 days.

GATX Corp. (GATX - Free Report) is unique railcar finance and leasing company combining asset knowledge and services, structuring expertise, creative partnering and risk capital to serve customers. It carries a Zacks Rank #2. The company has expected earnings growth of 6.2% for current year. The Zacks Consensus Estimate for the current year has improved by 6.2% over the last 30 days.

Triton International Ltd. (TRTN - Free Report) offers acquisition, leasing, re-leasing, and sale of intermodal containers. It has a Zacks Rank #2. The company has expected earnings growth of 55% for current year. The Zacks Consensus Estimate for the current year has improved by 3.1% over the last 30 days.

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At the center of everything we do is a strong commitment to independent research and sharing its profitable discoveries with investors. This dedication to giving investors a trading advantage led to the creation of our proven Zacks Rank stock-rating system. Since 1988 it has more than doubled the S&P 500 with an average gain of +25.26% per year. These returns cover a period from January 1, 1988 through December 3, 2018. Zacks Rank stock-rating system returns are computed monthly based on the beginning of the month and end of the month Zacks Rank stock prices plus any dividends received during that particular month. A simple, equally-weighted average return of all Zacks Rank stocks is calculated to determine the monthly return. The monthly returns are then compounded to arrive at the annual return. Only Zacks Rank stocks included in Zacks hypothetical portfolios at the beginning of each month are included in the return calculations. Zacks Ranks stocks can, and often do, change throughout the month. Certain Zacks Rank stocks for which no month-end price was available, pricing information was not collected, or for certain other reasons have been excluded from these return calculations.

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